Khyber-Pakhtunkhwa Finance Minister Taimur Saleem Jhagra on Thursday claimed that the federal ministry of the same portfolio had slashed the erstwhile Federally Administered Tribal Areas’ (Fata) budget on the intervention of the coalition government.
Jhagra has been seeking a meeting with his federal counterpart, Ishaq Dar, for the past few weeks to discuss fiscal disputes.
In an interaction with the media, Jhagra said a senior official had revealed in the presence of former federal finance minister Miftah Ismail that the proposed allocation for the tribal districts was reduced from Rs74 billion to Rs60 billion in the budget.
The provincial government has been agitating against the low allocation for the tribal districts that according to it had placed additional burden on Peshawar.
Jhagra said he had been seeking a meeting with Federal Finance Minister Ishaq Dar to present the case of his province -- the financial affairs of which had been adversely affected on account of nonpayment of Rs120 billion by the Centre.
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The deteriorating financial position of K-P underscores the implications of political instability that is damaging every economic sphere.
However, these political forces are not ready to sit with each other to sort out their differences yet.
Jhagra said the provincial government was forced to reduce its development expenditures.
He added that the federal government had not paid the province an amount of Rs60 billion in net hydel profit.
Instead, he claimed that it was suggesting that it would propose to increase the electricity prices to settle the dues.
The provincial minister maintained that against the annual allocation of Rs55 billion, only Rs5 billion had been released to K-P yet for development expenditures, forcing the suspension of uplift work in the province.
“The provincial government is already paying Rs3 billion per month out of its allocation to clear the salaries of the erstwhile Fata employees,” he added.
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Jhagra said based on the performance of the Federal Board of Revenue (FBR), the body would miss its annual tax target by about Rs700 billion and end up collecting Rs6.8 trillion.
“This will also reduce the provincial receipts by around 65 billion,” he added.
When asked whether or not his province would be able to generate a cash surplus required under the International Monetary Fund (IMF) deal, Jhagra replied that it was impossible under the prevailing situation.
He added that the provincial government had already written three letters to the Centre in this connection, but so far the federal finance ministry had not resolved the issues.
On account of net hydel profits, he added, not a single rupee had been received from the Centre since April 2022 when the present coalition government took over.
“This has forced the K-P government to cut many non-salary expenses,” the provincial minister claimed.
The minister said pensions were fast becoming a major issue and would soon become the single largest national expense after debt servicing.
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Jhagra added that the provincial government had introduced pension reforms that included enhancing the minimum retirement age from 45 to 55 years and revising the rules.
“These measures will help save Rs13 billion annually,” he maintained.
“The provincial government has also introduced a contributory pension system for new recruitments,” he said.
However, he added that the next major challenge would be to convince the existing employees to adopt the new system.
Jhagra said the K-P government was thinking of imposing a nominal pension tax that would gradually increase to 10%.
“In 2004, the provincial pension bill was less than Rs1 billion that has already increased to Rs108 billion,” he added.
The minister said without reforms, the K-P wage bill would have been more than the total provincial receipts in 2027, leaving nothing to spend on other heads.
He emphasised that the federal and provincial governments should work to reduce their wage bills.
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Jhagra warned that a time might come when no government would be able to pay pensions to their retiring employees.